This is hardly one that many investors would view as a value stock, but given the debacle in the energy sector over the past year, the decline in share prices has pushed it almost to value levels. Schlumberger Ltd. (NYSE: SLB) remains the largest oilfield services company in the world for now, with far-reaching operations all around the globe, and it could be poised for years of solid growth despite the huge turndown in oil pricing.
RBC and a host of other Wall Street analysts think the company will continue to drive margins on execution, technologies and efficiencies. Russia, Saudi Arabia, Iraq and China are expected by some to be the strongest markets, if geopolitical concerns remain somewhat in check.
Schlumberger announced last August it would buy oil field services giant Cameron International in a deal expected to cost about $12.7 billion in cash and stock. Wall Street analysts note what they term the company’s “drive to disrupt the status quo,” which includes transformation initiatives like the gigantic purchase of Cameron. Trading at a low 6.6 times the firm’s normalized EBITDA estimates, the stock looks cheap.
The company reported solid fourth-quarter earnings, though revenues come in slightly under Wall Street estimates. The company said a new share repurchase program of $10 billion was approved, as Schlumberger continues to return capital to shareholders.
Schlumberger investors receive a 2.71% dividend. The $87 UBS price objective is higher than the consensus target of $82.22. The shares closed Wednesday at $72.75.
This stock has been absolutely demolished, but a recent successful secondary offering cheered Wall Street and shareholders. Weatherford International Ltd. (NYSE: WFT) is one of the largest multinational oilfield service companies, providing innovative solutions, technology and services to the oil and gas industry. It operates in over 100 countries and has a network of approximately 1,200 locations, including manufacturing, service, research and development, and training facilities.
The company offers customers a wide range of global capabilities, including a proprietary system for pressure management in the mushrooming arena of subsea production. The changes in government oil policy in Mexico in 2014 may provide some favorable tailwinds for the company, despite the huge downturn in oil pricing.
According to management, Weatherford reduced its workforce by 11,000 employees in 2015, and that translated to a reduction in annual operational costs of $803 million. Combining the savings with the capital raise, you have a positive setup for shareholders going forward.
The UBS price target is $11, and the consensus target is $9.21. Shares closed Wednesday at $6.50.
While the ride could remain bumpy, it’s looking as though perhaps the worst is over. These top companies have gotten leaner in the downturn and can excel going forward if the market firms.